NB Power regroup could save $10M: Leonard

Energy Minister Craig Leonard says operating NB Power as competing subsidiaries is costing taxpayers up to $10 million a year instead of saving money as promised when it was unbundled seven years ago.

Putting the six companies back together into a single company as part of the province's new energy strategy announced earlier this week will save an estimated $8-million to $10-million annually, he said.

'It is a substantial amount and that's why we're moving forward with it.' —Energy Minister Craig Leonard

"Whether that's duplication of positions, or simply administrative functions, or just processes that we can either eliminate or improve on, but again, it is a substantial amount and that's why we're moving forward with it," he said.

In 2004, when Bernard Lord's Progressive Conservative government decided to split up the Crown corporation, then-president Stewart MacPherson said it would make the organization leaner and save customers money.

"In unbundling these companies and getting them on a more commercial basis, you know, it's going to lead to a more efficient allocation of capital," MacPherson said.

"It's going to lead to other opportunities. It's certainly going to lead to less risk being taken by the taxpayer in the province."

Market never developed

Leonard admits that market development never happened.

"The idea was that that would facilitate a competitive market to develop; that we'd have some private enterprises coming into the generation and distribution and transmission side of things, then some competition would develop and that would be beneficial for energy customers," he said.

"That market just simply hasn’t developed."

When the Lord government introduced the Electricity Act changes, it set out a provision that would allow NB Power's 42 largest industrial clients to leave the Crown corporation and purchase their power elsewhere.

If a company wanted to leave NB Power, a regulatory process would have been set up to sort out how much the company would owe the Crown corporation, in terms of paying back the costs NB Power incurred to hook that company up to the grid.

No company even launched the regulatory process to see how much it would cost to leave the system.

The idea of a competitive energy market starting in the province now appears to be even further down the road.

The province's energy minister said the government doesn't expect to see a competitive market for at least 10 years.

"With the markets where they are right now and especially with the low cost of interest out in the market place, really it'd be very difficult for any private enterprise to compete against a government enterprise, especially one that has mature assets like NB Power does," he said.

The situation is not unique to New Brunswick, he stressed. It's the same right across North America.

But Leonard said he hopes NB Power can still serve as an economic development tool once it's turned back into an integrated utility.

"What we want to do is set up a competitive utility that can provide low and stable energy prices and as a result that will be attractive to get more people coming to New Brunswick to set up their shop and obviously create jobs that way," he said.

Under the province's new energy plan, NB Power Holding Corporation (Holdco), NB Power Distribution and Customer Service (Disco), NB Power Generation (Genco), NB Power Nuclear (Nuclearco) and NB Power Transmission (Transco) will be regrouped.

The New Brunswick System Operator (NBSO) — a separate, independent agency that allows all power utilities to bid for space on New Brunswick's transmission lines — will be folded back into NB Power.

The reintegration of NBSO must be done carefully to comply with American regulations on energy exports, which stipulate that a Canadian utility wanting to sell electricity in the United States must give its competitors fair access to its transmission lines.

"NB Power will become the sole developer and owner of the transmission system in New Brunswick, thus maximizing our geographic advantage in the international northeast region," the report said.

"Reserving the right for NB Power to provide new interconnection transmission capacity, rather than market participants from outside New Brunswick, will maximize the benefits to New Brunswick on energy deals being transacted through the province."

Also under this plan, NB Power will be able to seek a "higher rate of return on transmission facilities that are built for interconnections."